Adaptec provides innovative data center I/O solutions that protect, accelerate, optimize, and condition data in today's most demanding data center environments. Adaptec products are used in IT environments ranging from traditional enterprise environments to fast-growing, on-demand cloud computing data centers. The company's products enable data center managers, channel partners and OEMs to deploy best-in-class storage solutions to meet their customers' evolving IT and business requirements. Around the world, leading corporations, government organizations, and medium and small businesses trust Adaptec technology. More information is available at www.adaptec.com, on its blog, storageadvisors.adaptec.com, and at adaptec.com/facebook and twitter.com/Adaptec_Inc.

Cautionary Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, are statements that could be deemed to be forward-looking statements, including but not limited to statements related to: Adaptec's new products may outrun the decline of the company's legacy product revenues; and the company's cash flow projections. Adaptec cautions that a variety of factors, including but not limited to the following, could cause results to differ materially from those expressed or implied in the forward-looking statements: continued or increased economic weakness and declines in customer spending; the potential failure of anticipated long-term benefits from new products to materialize; the potential impact of adverse changes in the global credit markets; the impact of industry technology transitions; fluctuating operating results; and other risks detailed from time to time in filings Adaptec makes with the SEC, including in the section entitled "Risk Factors" in its latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

SOURCE: Adaptec, Inc.

Adaptec, Inc. 
Investor: 
Investor Relations Desk 
408-957-7811 
Investor_Relations@adaptec.com

Adaptec's MaxIQ SSD Cache Performance Solution integrates up to four tuned 32GB Intel(R) X25-E Extreme SATA SSDs, with Adaptec's MaxIQ SSD caching software and its Series 5Z, Series 5 or Series 2 Storage Controllers to provide I/O intensive data center and cloud computing customers with cost-effective scalability and increased performance without disrupting existing operations. It is the first solution for building and managing High-Performance Hybrid Arrays (HPHAs) - storage arrays using both solid-state drives and hard disk drives - which dramatically increase I/O performance, reduce capital and operating expenses by as much as 50 percent, and can deliver significant savings in power consumption over hard disk drive-only arrays. MaxIQ can be deployed using commercial off-the-shelf (COTS) hardware, requiring no modification of existing storage architectures, application software or operating systems for easy integration.

AppLabs evaluated the performance of MaxIQ in its MySQL Testing Environment and found that read and write throughput increased eight times with MaxIQ SSD cache enabled. Transactions per second improved 6.9 times, going from 346 transactions per second with SSD cache disabled to 2374 transactions per second with SSD cache enabled. A total of 1.6 million transactions were executed during each test run. These increases result in higher levels of performance, allowing data center managers to increase the number of users hosted per IT dollar, reduce the need for additional equipment acquisition and significantly cut data center energy costs.

"Data centers running applications with high 'read' demands such as databases running MySQL are continuing to grow at an exponential pace," said Marc Lowe, Adaptec vice president of marketing and business development. "The testing results from AppLabs' MySQL environment demonstrate that Adaptec's MaxIQ SSD Cache Performance Solution is ideal for cost-effectively addressing the I/O bottleneck and maximizing performance for data centers in today's economy. AppLabs' testing expertise and experience allowed us to ensure everything met the highest standards."

"This is a testimony of the best-in-class performance testing services offered by AppLabs. We help our clients identify performance bottlenecks early to ensure that their applications have near-zero defects," said John Carmody, senior vice president and head of Americas, AppLabs. "Through AppLabs rigorous Performance Testing procedures with MySQL server, Adaptec's MaxIQ SSD Cache Performance Solution demonstrated that throughput increased significantly when SSD caching was enabled."

The Adaptec MaxIQ SSD Cache Performance Solution is the latest product within Adaptec's Data Conditioning Platform strategy, an innovative approach delivering business value to data center managers by intelligently routing, optimizing and protecting data as it moves through the I/O path. The Data Conditioning Platform is at the core of the company's strategic goal of lowering costs, maximizing performance and achieving Green IT objectives in next generation enterprise and cloud data centers. Adaptec customer solutions built on the Data Conditioning Platform provide data center managers, system integrators, and storage and server OEMs with improved hardware and software utilization, along with non-intrusive technology integration to lower the risks traditionally associated with adopting new data center technologies.

For additional information, and more testing details, download the AppLabs report (http://www.adaptec.com/NR/rdonlyres/2767C960-2905-4695-9523- BC1E394943F4/0/AppLabsMySQL.pdf?refURL=/AppLabsMYSQL) from Adaptec's Web site.

About AppLabs

AppLabs is the world's largest software testing and quality management company. With over a decade of experience, AppLabs has become a trusted partner to more than 600 companies, providing both quality assurance and third-party validation. Clients include American Airlines, Experian, JP Morgan, VocaLink and National Australia Bank among others. AppLabs goes beyond technical expertise when it comes to IT services and offers customers rigorous risk mitigation processes, a singular focus on quality, expert project management, communication and global delivery capabilities. It is the first software testing company to get appraised at SEI CMMI Level 5, the highest quality standard attainable in software engineering. Headquartered in Philadelphia, the company maintains advanced testing facilities in the US, India and Europe. For more information, visit www.applabs.com.

About Adaptec

Adaptec, Inc. (NASDAQ: ADPT) provides innovative data center I/O solutions that protect, accelerate, optimize, and condition data in today's most demanding data center environments. Adaptec products are used in IT environments ranging from traditional enterprise environments to fast growing, on-demand cloud computing data centers. The company's products enable data center managers, channel partners and OEMs to deploy best-in-class storage solutions to meet their customers' evolving IT and business requirements. Around the world, leading corporations, government organizations, and medium and small businesses trust Adaptec technology. More information is available at www.adaptec.com, on its blog, storageadvisors.adaptec.com, and at adaptec.com/facebook and twitter.com/Adaptec_Inc.

Adaptec is a registered trademark and Unified Serial is a trademark in the United States and other countries. Other company names are trademarks or registered trademarks of their respective owners. Adaptec disclaims any and all rights in these trademarks.

Intel and the Intel logo are trademarks of Intel Corporation in the United States and other countries.

Contact:
    Sara Lee
    Walt & Company for Adaptec
    +1-408-369-7200 x2980
    slee@walt.com

Sara Lee of Walt & Company, +1-408-369-7200, ext. 2980, slee@walt.com, for
Adaptec

"Steel's distortion relates to the Board's strategic review process. The Board asked its advisor to evaluate a number of alternatives, a subset of which were alternatives for separating the Company's assets, ranging from a spin-off to a split of the corporation into multiple entities. The advisor found that, within that subset of alternatives, a sale was the best -- but the advisor did not compare the separation of assets against other alternatives, nor did the advisor determine that a sale of the business was the best way to create value for stockholders. The advisor is also considering other scenarios outside of that subset," added Mr. Kennedy.

"While the Board majority is open to all options to maximize value, and has tried on several occasions over the years to find buyers for the business, the Board recognizes that the success of such strategic actions depends on timing to get the best value," he noted. "In the meantime, the Board majority is committed to a significant cash dividend to stockholders after taking into account Adaptec's needs for working capital and for other strategic opportunities. A cash dividend is an alternative Steel has consistently resisted.

"Steel's vague plan suggests value-destroying approaches similar to those followed by CoSine Communications, of which Steel has been an investor at least since 2005. The Company ceased its technology customer service operations in 2006 and has been pursing an 'opportunistic, value-focused investment strategy and is not targeting any specific industries.' To date, CoSine has made no acquisition nor has it returned cash to stockholders, as would be the case in a properly structured SPAC (Special Purpose Acquisition Company). CoSine now trades on the Pink Sheets at a current market value that is slightly less than the value of its cash and cash equivalents," he added.

In response to Steel's comments on Adaptec's quarterly results, Mary Dotz, Chief Financial Officer, said:

"Our results, excluding one-time costs relating to Steel's consent solicitation, were in line with the operating plan that was approved by the Board -- including by Steel's representatives. The results we believe underscore our strong financial foundation and demonstrate the rising acceptance of Adaptec's new products, which have now grown to account for 48% of our revenues and are close to outrunning the decline of our legacy revenues.

"While Steel confuses the issue by citing projections of our cash burn that are based on GAAP numbers, which include non-cash and one-time charges, we generated close to $5 million in cash from our operations last quarter. Our plan projects a positive cash flow from operations this year and a modest operating cash burn in the next fiscal year, excluding the impact of the Board's decision to declare a cash dividend," she added.

About Adaptec

Adaptec provides innovative data center I/O solutions that protect, accelerate, optimize, and condition data in today's most demanding data center environments. Adaptec products are used in IT environments ranging from traditional enterprise environments to fast-growing, on-demand cloud computing data centers. The company's products enable data center managers, channel partners and OEMs to deploy best-in-class storage solutions to meet their customers' evolving IT and business requirements. Around the world, leading corporations, government organizations, and medium and small businesses trust Adaptec technology. More information is available at www.adaptec.com, on its blog, storageadvisors.adaptec.com, and at adaptec.com/facebook and twitter.com/Adaptec_Inc.

Cautionary Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, are statements that could be deemed to be forward-looking statements, including but not limited to statements related to: Adaptec's new products may outrun the decline of the company's legacy product revenues; and the company's cash flow projections. Adaptec cautions that a variety of factors, including but not limited to the following, could cause results to differ materially from those expressed or implied in the forward-looking statements: continued or increased economic weakness and declines in customer spending; the potential failure of anticipated long-term benefits from new products to materialize; the potential impact of adverse changes in the global credit markets; the impact of industry technology transitions; fluctuating operating results; and other risks detailed from time to time in filings Adaptec makes with the SEC, including in the section entitled "Risk Factors" in its latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

Important Notice Regarding Availability of Consent Revocation Materials

The Consent Revocation Statement and the Additional Solicitation Materials are available free of charge at www.adaptec.com/investor/proxy.

Stockholders may also contact Georgeson Inc. with questions or requests for additional copies of the consent revocation materials by calling toll free at (800) 223-2064.

SOURCE: Adaptec, Inc.

The Abernathy MacGregor Group (Media) 
Tom Johnson, 212-371-5999 
Ian Campbell and Jim Lucas, 213-630-6550 
or 
Georgeson (Investors) 
800-223-2064 
adaptecinfo@georgeson.com

-- Total net revenues of $18.4 million

-- GAAP gross margins of 44%; non-GAAP gross margins of 50%

-- GAAP net loss per share of $(0.03); non-GAAP net loss per share of $(0.01)

-- Positive operating cash flows from continuing operations of $4.9 million

-- Ended the quarter with $385.6 million in combined cash, cash equivalents and marketable securities

Business Highlights for Second Quarter of Fiscal 2010

-- Unveiled strategic vision for the Company's Data Conditioning Platform, which enables next-generation enterprise and cloud data centers to utilize our technologies to improve server and storage utilization, lower costs and address green initiatives.

-- Launched the Company's Max IQ SSD Cache Performance Solution, an industry "first" for building and managing High-Performance Hybrid Arrays in commodity servers to maximize performance while minimizing capital and operating costs, without disrupting existing operations.

-- Received Editor's Choice Award for one of Adaptec's Series 5 Unified Serial controller from PC Magazine Belgium.

Financial Results

Net revenues for the Company's second quarter of fiscal 2010 were $18.4 million, compared with $31.7 million for the second quarter of fiscal 2009. Gross margins, computed on a generally accepted accounting principles (GAAP) basis, were 44% for the second quarter of fiscal 2010, compared with 42% for the second quarter of fiscal 2009. Non-GAAP gross margins for the second quarter of fiscal 2010 were 50%, compared with 44% for the second quarter of fiscal 2009.

The Company's GAAP loss from continuing operations, net of taxes, for the second quarter of fiscal 2010 was $(4.1) million, or $(0.03) per share, compared with GAAP income from continuing operations, net of taxes, of $3.3 million, or $0.02 per share, for the second quarter of fiscal 2009. GAAP net loss for the second quarter of fiscal 2010 was $(3.8) million, or $(0.03) per share, compared with GAAP net income of $3.3 million, or $0.02 per share, for the second quarter of fiscal 2009.

Non-GAAP loss from continuing operations, net of taxes, for the second quarter of fiscal 2010 was $(1.8) million, or $(0.01) per share, compared with non-GAAP income from continuing operations, net of taxes, of $4.0 million, or $0.03 per share, for the second quarter of fiscal 2009. Non-GAAP net loss for the second quarter of fiscal 2010 was $(1.8) million, or $(0.01) per share, compared with non-GAAP net income of $4.0 million, or $0.03 per share, for the second quarter of fiscal 2009.

"Although customer engagements with our new products continue to grow, our new product revenue is not enough to offset the decline in revenues from our legacy products," said S. "Sundi" Sundaresh, President and Chief Executive Officer of Adaptec. "Our recent product introductions, such as our MaxIQ Cache Performance Solution that was successfully launched in September as part of our Data Conditioning Platform, allow us to deliver new server, storage and application optimization technologies with the ability to reduce financial costs and address green initiatives for the next generation enterprise and cloud data centers. We continue to focus on attracting new customers for our new products while maintaining tight controls on our operating expense levels."

Business Outlook

For the third quarter of fiscal 2010, net revenues are projected to be between $15 million and $17 million. GAAP net loss per share is projected to be in the range of $(0.06) and $(0.04). Non-GAAP net loss per share is projected to be in a range of $(0.04) and $(0.02). Actual results may vary depending on a number of factors including challenging economic conditions in IT spending for servers and timing of the Company's revenue transitions.

Non-GAAP Financial Information

The non-GAAP results for all periods presented differ from results measured under GAAP as they exclude stock-based compensation expense, expense associated with the management liquidation pool established in connection with the Aristos Logic Corporation transaction, amortization of acquisition-related intangible assets, restructuring costs, gain on extinguishment of debt, tax differences due to GAAP versus non-GAAP measurements and certain items related to discontinued operations. A complete reconciliation between GAAP and non-GAAP information referred to in this release is provided in the attached tables at the end of this press release in the section "Use of Non-GAAP Financial Measures."

Conference Call

The Adaptec second quarter of fiscal 2010 earnings conference call is scheduled for 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on October 29, 2009. Individuals may participate via webcast at least 15 minutes prior to the teleconference or listen to an audio replay by visiting www.adaptec.com/investor. A telephone replay of the teleconference will be available through November 5, 2009 by calling (888) 286--8010 in the U.S. or (617) 801--6888 internationally and referencing "passcode" number 61561219.

About Adaptec

Adaptec, Inc. (NASDAQ:ADPT) provides innovative data center I/O solutions that protect, accelerate, optimize, and condition data in today's most demanding data center environments. Adaptec products are used in IT environments ranging from traditional enterprise environments to fast growing, on-demand cloud computing data centers. The company's products enable data center managers, channel partners and OEMs to deploy best-in-class storage solutions to meet their customers' evolving IT and business requirements. Around the world, leading corporations, government organizations, and medium and small businesses trust Adaptec technology. More information is available at www.adaptec.com, on its blog, storageadvisors.adaptec.com, and at adaptec.com/facebook and twitter.com/Adaptec_Inc.

Safe Harbor Statement

This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements such as "will," "believe," "are projected to be" and similar expressions are statements regarding future events or the future performance of Adaptec, and include statements regarding projected operating results. These forward-looking statements are based on current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks include: general economic conditions; that if we do not meet our operational objectives, we may have to continue to implement additional plans to reduce our operating costs; achieving necessary support from the contract manufacturers to which we have outsourced manufacturing, assembly and packaging of our products; Adaptec's ability to launch new products; difficulty in forecasting the volume and timing of customer orders; reduced demand in the server, network storage and desktop computer markets; our target markets' failure to accept, or delay in accepting, network storage and other advanced storage solutions, including our MaxIQ SSD Cache Performance Solution, SAS, SATA and iSCSI lines of products; decline in consumer acceptance of our current products; the timing and volume of orders by OEM customers for storage products; our ability to control and manage costs associated with the delivery of new products; and the adverse effects of the intense competition we face in our business. For a more complete discussion of risks related to our business, reference is made to the section titled "Risk Factors" included in our Quarterly Report on Form 10-Q for the quarter ended July 3, 2009 on file with the Securities and Exchange Commission. Adaptec assumes no obligation to update any forward-looking information that is included in this release.

Adaptec is a registered trademark and Unified Serial is a trademark in the United States and other countries. Other company names are trademarks or registered trademarks of their respective owners. Adaptec disclaims any and all rights in these trademarks.

Adaptec, Inc.
GAAP Condensed Consolidated Statements of Operations
(unaudited)
                                                                 Three-Month Period Ended                        Six-Month Period Ended
                                                                 October 2,    July 3,         September 26,     October 2,     September 26,
                                                                 2009          2009            2008              2009           2008
                                                                 (in thousands, except per share amounts)
Net revenues                                                  $  18,442     $  21,738       $  31,655         $  40,180     $   63,158
Cost of revenues                                                 10,279        11,635          18,326            21,914         35,147
Gross profit                                                     8,163         10,103          13,329            18,266         28,011
Operating expenses:
Research and development                                         7,195         7,554           4,863             14,749         10,766
Selling, marketing and administrative                            7,926         6,635           8,753             14,561         18,250
Amortization of acquisition-related intangible assets            325           325             108               650            108
Restructuring charges (credits)                                  (92     )     149             1,402             57             3,239
Total operating expenses                                         15,354        14,663          15,126            30,017         32,363
Loss from continuing operations                                  (7,191  )     (4,560  )       (1,797  )         (11,751 )      (4,352  )
Interest and other income, net                                   2,364         2,647           6,242             5,011          11,504
Interest expense                                                 (1      )     (4      )       (476    )         (5      )      (1,317  )
Income (loss) from continuing operations before income taxes     (4,828  )     (1,917  )       3,969             (6,745  )      5,835
Benefit from (provision for) income taxes                        737           2,071           (657    )         2,808          (2,570  )
Income (loss) from continuing operations, net of taxes           (4,091  )     154             3,312             (3,937  )      3,265
Discontinued operations:
Loss from discontinued operations, net of taxes                  --            --              --                --             (734    )
Gain on disposal of discontinued operations, net of taxes        318           440             --                758            5,794
Income from discontinued operations, net of taxes                318           440             --                758            5,060
Net income (loss)                                             $  (3,773  )  $  594          $  3,312          $  (3,179  )  $   8,325
Income (loss) per common share:
Basic
Continuing operations                                         $  (0.03   )  $  0.00         $  0.03           $  (0.03   )  $   0.03
Discontinued operations                                       $  0.00       $  0.00         $  --             $  0.01       $   0.04
Net income (loss)                                             $  (0.03   )  $  0.00         $  0.03           $  (0.03   )  $   0.07
Diluted
Continuing operations                                         $  (0.03   )  $  0.00         $  0.02           $  (0.03   )  $   0.02
Discontinued operations                                       $  0.00       $  0.00         $  --             $  0.01       $   0.04
Net income (loss)                                             $  (0.03   )  $  0.00         $  0.02           $  (0.03   )  $   0.06
Shares used in computing income (loss) per share:
Basic                                                            118,961       119,284         119,682           119,122        119,437
Diluted                                                          118,961       119,869         134,594           119,122        137,038

Use of Non-GAAP Financial Measures

To supplement its condensed consolidated financial statements in accordance with generally accepted accounting principles (GAAP), the Company's earnings release contains non-GAAP financial measures that exclude certain expenses, gains and losses. The Company believes that the use of non-GAAP financial measures provides useful information to investors to gain an overall understanding of its current financial performance and its prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that the Company believes are not indicative of its core operating results. In addition, non-GAAP financial measures are used by management for budgeting and forecasting as well as subsequently measuring the Company's performance, and the Company believes that it is providing investors with financial measures that most closely align to its internal measurement processes. The Company also believes, based on feedback provided to the Company during its earnings calls' Q&A sessions and discussions with the investment community, that the non-GAAP financial measures it provides enhance the ability of the investment community to review the Company's results and projections.

The non-GAAP financial information is presented using consistent methodology from quarter-to-quarter and year-to-year. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP financial measures presented by the Company may be different than the non-GAAP financial measures presented by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial measures.

The Company excludes the following expenses, gains and losses from its non-GAAP financial measures, when applicable:

Stock-based compensation expense: Stock-based compensation expense is associated with stock awards, such as stock options, restricted stock awards and restricted stock units that are granted under the Company's equity incentive plans. The Company excludes stock-based compensation expense from non-GAAP financial measures because it is a non-cash measurement that does not reflect the Company's ongoing business; the Company believes that the provision of non-GAAP information that excludes stock-based compensation improves the ability of investors to compare its period-over-period operating results, as there is significant variability and unpredictability across companies with respect to this expense.

Management liquidation pool: The management liquidation pool of $5.6 million was included as part of the total consideration to acquire Aristos Logic Corporation. Under the merger agreement, the Company paid $3.2 million upon closing the merger transaction. The remaining $2.4 million was paid within twelve months from the acquisition date, to certain employees of the acquired company, contingent upon their continued employment with the Company. The Company excluded expenses associated with the management liquidation pool as these payments were instituted as a component of the acquisition process and did not reflect the Company's ongoing business.

Amortization of acquisition-related intangible assets: Amortization of acquisition-related intangible assets primarily relate to core and existing technologies, customer relationships and backlog that were acquired from Aristos Logic Corporation. The Company excludes the amortization of acquisition-related intangible assets because it does not reflect the Company's ongoing business. In addition, in accordance with GAAP, the Company generally recognizes expenses for internally-developed intangible assets as they are incurred, notwithstanding the potential future benefit such assets may provide. Unlike internally-developed intangible assets, however, and also in accordance with GAAP, the Company generally capitalizes the cost of acquired intangible assets and recognizes that cost as an expense over the useful lives of the assets acquired (other than goodwill, which is not amortized, as required under GAAP). As a result of their GAAP treatment, there is an inherent lack of comparability between the financial performance of internally-developed intangible assets and acquired intangible assets. Accordingly, the Company believes it is useful to provide, as a supplement to its GAAP operating results, a non-GAAP financial measure that excludes the amortization of acquired intangible assets in order to enhance the period-over-period comparison of its operating results, as there is significant variability and unpredictability across companies with respect to this expense. The amortization of acquisition-related intangible assets for core and existing technologies and backlog are being reflected as cost of revenues, while the amortization of acquisition-related intangible assets for customer relationships is being reflected as part of operating expenses.

Restructuring charges (credits): Restructuring charges (credits) primarily relate to activities engaged in by the Company's management to implement extensive company-wide expense-control programs. Restructuring charges (credits) are excluded from non-GAAP financial measures because they are not considered to be part of core operating activities and the occurrence of such costs is infrequent. Although the Company has engaged in various restructuring activities over the past several years, each has been a discrete, individual event based on a unique set of business objectives. The Company does not engage in restructuring activities in the ordinary course of business. As such, the Company believes it is appropriate to exclude restructuring charges (credits) from its non-GAAP financial measures, as it enhances the ability of investors to compare the Company's period-over-period operating results.

Gain on extinguishment of debt: The gain on extinguishment of debt relates to repurchases of the Company's 3/4% convertible notes in the open market. The gain on extinguishment of debt is excluded from non-GAAP financial measures because the occurrence of such costs is infrequent, which would affect the ability of investors to compare the Company's period-over-period operating results, and because the Company does not believe that these activities are reflective of gains customarily incurred in the management of its cash resources.

Income taxes: Income taxes relates to incremental income taxes associated with certain non-GAAP items and tax provisions and refunds from certain discrete tax events.

Discontinued operations: Discontinued operations relates to the sale of the Snap Server NAS business. Certain items from discontinued operations are excluded from non-GAAP financial measures, which include the gain on disposal of discontinued operations, net of taxes, and certain expenses discussed above related to stock-based compensation and income taxes. The gain on disposal of discontinued operations is excluded from non-GAAP financial measures because the occurrence of such costs is infrequent, which would affect the ability of investors to compare the Company's period-over-period operating results, and because the Company does not believe that this activity is reflective of gains and losses customarily incurred in the management of its cash resources.

Adaptec, Inc.
Reconciliation of GAAP to Non-GAAP Results
(unaudited)
                                                                     Three-Month Period Ended                           Six-Month Period Ended
                                                                     October 2,     July 3,          September 26,      October 2,     September 26,
                                                                     2009           2009             2008               2009           2008
                                                                     (in thousands)
GAAP gross profit                                                $   8,163      $   10,103       $   13,329         $   18,266     $   28,011
Stock-based compensation expense (1)                                 148            77               118                225            221
Amortization of acquisition-related intangible assets (2)            940            940              427                1,880          427
Non-GAAP gross profit                                            $   9,251      $   11,120       $   13,874         $   20,371     $   28,659
GAAP income (loss) from continuing operations, net of taxes      $   (4,091  )  $   154          $   3,312          $   (3,937  )  $   3,265
Stock-based compensation expense (1)                                 1,116          1,086            (219    )          2,202          1,167
Management liquidation pool                                          51             77               332                128            332
Amortization of acquisition-related intangible assets (2)            1,265          1,265            535                2,530          535
Restructuring charges (credits)                                      (92     )      149              1,402              57             3,239
Gain on extinguishment of debt                                       --             --               (1,283  )          --             (1,283  )
Income taxes                                                         --             (2,279  )        (31     )          (2,279  )      1,586
Non-GAAP income (loss) from continuing operations, net of taxes  $   (1,751  )  $   452          $   4,048          $   (1,299  )  $   8,841
GAAP net income (loss)                                           $   (3,773  )  $   594          $   3,312          $   (3,179  )  $   8,325
Stock-based compensation expense (1)                                 1,116          1,086            (219    )          2,202          1,167
Management liquidation pool                                          51             77               332                128            332
Amortization of acquisition-related intangible assets (2)            1,265          1,265            535                2,530          535
Restructuring charges (credits)                                      (92     )      149              1,402              57             3,239
Gain on extinguishment of debt                                       --             --               (1,283  )          --             (1,283  )
Income taxes                                                         --             (2,279  )        (31     )          (2,279  )      1,586
Income from discontinued operations, net of taxes                    (318    )      (440    )        --                 (758    )      (5,563  )
Non-GAAP net income (loss)                                       $   (1,751  )  $   452          $   4,048          $   (1,299  )  $   8,338
Shares used in computing income (loss) per share:
Basic - GAAP and non-GAAP                                            118,961        119,284          119,682            119,122        119,437
Diluted - GAAP                                                       118,961        119,869          134,594            119,122        137,038
Employee options and awards                                          --             --               --                 --             --
3/4% convertible notes                                               --             --               (14,152 )          --             (16,688 )
Diluted - non-GAAP                                                   118,961        119,869          120,442            119,122        120,350
(1) Stock-based compensation expense by caption was as follows:
                                                                     Three-Month Period Ended                           Six-Month Period Ended
                                                                     October 2,     July 3,          September 26,      October 2,     September 26,
                                                                     2009           2009             2008               2009           2008
                                                                     (in thousands)
Cost of revenues                                                 $   148        $   77           $   118            $   225        $   221
Research and development                                             375            333              (701    )          708            (266    )
Selling, marketing and administrative                                593            676              364                1,269          1,212
Total stock-based compensation expense                           $   1,116      $   1,086        $   (219    )      $   2,202      $   1,167
(2) Amortization of acquisition-related intangible assets by
caption was as follows:
                                                                     Three-Month Period Ended                           Six-Month Period Ended
                                                                     October 2,     July 3,          September 26,      October 2,     September 26,
                                                                     2009           2009             2008               2009           2008
                                                                     (in thousands)
Cost of revenues                                             $ 940     $ 940     $ 427   $ 1,880   $ 427
Amortization of acquisition-related intangible assets          325       325       108     650       108
Total amortization of acquisition-related intangible assets  $ 1,265   $ 1,265   $ 535   $ 2,530   $ 535

Adaptec, Inc.
Condensed Consolidated Balance Sheet
(unaudited)
                                                                         As of
                                                                         October 2, 2009      March 31, 2009      September 26, 2008
                                                                         (in thousands)
Cash, cash equivalents and marketable securities                     $   385,587          $   376,592         $   456,922
Accounts receivable, net                                                 7,718                11,735              18,333
Inventories                                                              2,913                4,095               6,524
Goodwill and other intangible assets, net                                18,851               19,748              39,452
Other assets                                                             31,080               37,937              42,818
Total assets                                                         $   446,149          $   450,107         $   564,049
Current liabilities, excluding current portion of convertible notes  $   22,776           $   23,779          $   35,475
Current portion of convertible notes                                     414                  474                 86,959
Other long-term obligations                                              12,563               14,974              17,514
Stockholders' equity                                                     410,396              410,880             424,101
Total liabilities and stockholders' equity                           $   446,149          $   450,107         $   564,049

Adaptec, Inc.
Guidance, including GAAP to Non-GAAP Net Loss Per Share
Reconciliation
(unaudited)
                                                        Three-Month Period Ended
                                                        January 1, 2010
Net revenues                                            $15.0 million - $17.0 million
GAAP diluted net loss per share                         $(0.06) - $(0.04)
Stock-based compensation expense                        $0.01
Amortization of acquisition-related intangible assets   $0.01
Non-GAAP diluted net loss per share                     $(0.04) - $(0.02)

SOURCE: Adaptec, Inc.

Adaptec, Inc. 
Investor Relations Desk, 408-957-7811 
Investor_Relations@adaptec.com